Be careful what you ask for, because you just might get it.
Consumer expectations will rise if prices do
Over the weekend, we rode a rollercoaster as Macmillan laid out its demands for ebook pricing to Amazon, and Amazon responded by pulling (nearly) all Macmillan titles from its store. Late Sunday, Amazon announced they would “capitulate” to Macmillan’s demands on pricing. It almost goes without saying that this will be the go-forward model for all major publishers, and maybe their independent brethren as well.
Publishers have gotten what they want.
Man, it seems like a victory doesn’t it? In a way it is. I’ve been of two minds on this topic since the entire concept of the “Agency Model” was announced (rough definition below). Setting aside the fact that it’s still opaque to parties with a vested interest (authors, agents, even other retailers), I have a natural aversion to wholesalers (book publishers) forcing prices on retailers (Amazon, et al). I believe price is an important tool in the arsenal of retailers. And, as a consumer, I’m not yet willing to pay more for the vast majority of ebooks being released today. More in a few paragraphs.
On the other hand, I love that this approach (finally) levels the playing field for all retailers. Sort of. Some have argued that this battle is not about DRM, but it is all about DRM. DRM is the tool retailers use to lock in consumers. Amazon does it. Sony does it. Barnes & Noble does it. Apple does it (or rather will, in the case of books). Every retailer who has a device has a proprietary DRM scheme. And publishers encourage this. They demand DRM.
These DRM schemes lock other retailers out of the devices. They allow companies to dominate the marketplace. Why would I shop IndieBound when I can’t load the books on my preferred device? Ah, the battles on the horizon! It’s going to be a bumpy year.
And…there is a lot more elasticity in ebook prices than has been acknowledged or realized. Macmillan is talking about pricing books in a (yet-to-be-revealed) dynamic manner, ranging from $14.99 to $5.99. As Macmillan has not previously been a good actor in ebook pricing, this news is heartening. This seems like an attempt to map the existing print marketplace to the digital marketplace, when now is the time for more creativity and thought when it comes to ebooks, content presentation, and pricing — and yeah, that does mean considering higher prices (I am not contradicting what I said about what I will pay).
Publishers have made bad arguments when it comes to ebook pricing. They confuse in-house value (often based on the price paid for the book) with consumer perception of value. Now these publishers who once hid behind Amazon — seriously, I’ve had publishers blame Amazon for crappy formatting when it was clear the underlying file was the problem — will have to stand behind their product. No. They will have to produce better quality books.
This means both from story and production perspectives. It doesn’t appear publishers will make more money from retailers under the proposed Agency Model, but consumer expectations will rise if prices do. There will not be additional margin — at least not significant additional margin — to play with, but publishers will be held to a higher ebook standard.
In my Publishing Perspectives article last week, I discussed the importance of getting basics right (in a “we couldn’t have done better if we’d coordinated it” moment, at Digital Book World, Liza Daly did a live presentation on this at well). During the skirmish between Amazon and Macmillan, I happened to be reading a Macmillan ebook, and the errors were like speed bumps. I cannot tell you how poor formatting pulls me out of a story (this goes for print as well). Quality is going to make a huge difference if publishers want to convince readers to pay more.
And this quality will be even more critical for books purchased via Apple’s bookstore. The display will not be forgiving of books with poor formatting (nor will the customers who buy the books). This is what publishing has been asking for, they have it, what happens next? And will the Agency Model be enough to cover innovation?
For those wondering, the Agency Model, as reported by Publishers Lunch, is roughly (registration required for link):
Though initially resistant to a new paradigm, by multiple accounts Apple has agreed in principal to do business with publishers under what is called the agency model–as opposed to the wholesaling model currently in place for ebook sales and most physical book sales. In the agency model, the publisher is considered as keeping possession of the actual goods (the ebook files) and it pays a commission to its authorized selling partners. So the publisher sets the retail price of the ebooks, and the commissioned agents have no ability to change that price. Ebooks sold under the agency model would be offered to any established trading partners who agree to the commission and other particulars.
I call this scan based trading, publishing style. Certainly, there is far more to this than described. First off, it hews awfully close to the description of direct sales. Then again, it’s hard to imagine major retailers allowing publishers to “keep possession” of files — publishers simply don’t have the fulfillment channels in place, and shouldn’t. I’m not opposed to publishers selling direct from their websites, but that’s a whole different type of infrastructure.
It’s all a bit fuzzy at this point. Agents are still wondering what this means, which means authors are wondering what this means. More specifically, how this new model maps to their existing (and future) contracts. Mike Shatzkin explores this as well in his post about this story.
So what does all this mean? I imagine the next huge debate will be between agents and publishers as the new model is mapped to real money for the people who write books. Other retailers will be demanding similar terms to Amazon (and perhaps breathing a sigh of relief). Consumers will be sniffing at the new pricing model and voting with their dollars (one doesn’t have to read between the lines of Amazon’s statement to know where the retailer hopes this ends). DRM will remain on the horizon.
Oh, and independent publishers and independent booksellers and individuals will be clamoring for equal treatment.
Fasten your seatbelts…